KDP in Indonesia-ddavis

59
CDD SCALING-UP ACTION RESEARCH INITIATIVE THE SECOND KECAMATAN DEVELOPMENT PROJECT: EVALUATION OF SCALING UP ISSUES BY DEBORAH DAVIS Section 1. Design Elements 1.1 Overall sociopolitical context and aim of project 1.1.1 The Second Kecamatan Development Project 1 is taking place in an environment of political and social upheaval. The fall of Suharto’s authoritarian New Order regime in 1998, after 33 years in power, left Indonesia in chaos, with massive poverty and social unrest, weak and corrupt institutions, and factional power struggles. The New Order had attempted to create national unity in this country of nearly 18,000 islands by imposing a uniform village administrative structure on thousands of autonomous communities with many different languages and cultures, and by dismantling social capital through such measures as banning local construction and maintenance of schools and other facilities, stigmatizing local resource management groups, channeling women into non-public roles, and defining family and community values in terms of how they helped or hindered the national development program. Local action was seen as incompatible with centralized investment decisions, but those decisions did not match local needs, and left large numbers of people in both urban and rural areas with inadequate (or an absence of) infrastructure and public services. The resulting lack of trust between communities and government, including village officials, who were appointed from above, was exacerbated by the corruption, nepotism, and lack of institutional transparency that pervaded every aspect of government. Social cohesion at the hamlet level was maintained by religious and traditional leaders (who, in many areas, had been chosen by election for more than a century before the New Order came to power); and in some ethnic areas by kinship networks. 1 A kecamatan, or subdistrict, comprises about 20 villages. A village comprises about 1,750 people.

description

Assessment of the World Bank-funded KDP community development project in Indonesia.

Transcript of KDP in Indonesia-ddavis

DD Scaling-Up Action Research Initiative

PAGE 28

CDD Scaling-Up Action Research Initiative

The Second Kecamatan Development Project: Evaluation of Scaling Up Issues

by Deborah Davis

Section 1. Design Elements

1.1 Overall sociopolitical context and aim of project

1.1.1 The Second Kecamatan Development Project is taking place in an environment of political and social upheaval.

The fall of Suhartos authoritarian New Order regime in 1998, after 33 years in power, left Indonesia in chaos, with massive poverty and social unrest, weak and corrupt institutions, and factional power struggles. The New Order had attempted to create national unity in this country of nearly 18,000 islands by imposing a uniform village administrative structure on thousands of autonomous communities with many different languages and cultures, and by dismantling social capital through such measures as banning local construction and maintenance of schools and other facilities, stigmatizing local resource management groups, channeling women into non-public roles, and defining family and community values in terms of how they helped or hindered the national development program. Local action was seen as incompatible with centralized investment decisions, but those decisions did not match local needs, and left large numbers of people in both urban and rural areas with inadequate (or an absence of) infrastructure and public services. The resulting lack of trust between communities and government, including village officials, who were appointed from above, was exacerbated by the corruption, nepotism, and lack of institutional transparency that pervaded every aspect of government. Social cohesion at the hamlet level was maintained by religious and traditional leaders (who, in many areas, had been chosen by election for more than a century before the New Order came to power); and in some ethnic areas by kinship networks. But these informal sources of authority remained separate from the government institutions that had been set up to replace them, and their existence was not acknowledged.

After Suharto was driven from office by economic crisis of the late 1990s, which deepened the already severe poverty and unrest and led to a violent uprising, reformers and donors began to identify corruption and poor governance as key factors in the persistence of poverty in the country. To address the intrinsic connection between poverty and poor governance, the countrys first freely elected president, Abdurrahman Wahid, initiated a dramatic decentralization program in January 2001, which aimed to reduce poverty by focusing on institutional transparency, anti-corruption measures, improved public services, and participation of the poor in planning and managing development programs. The decentralization was supported by a new CAS, which also gave high priority to strengthening local informal institutions, to enable them to channel local demand and provide the checks and balances necessary for accountable local government. The Kecamatan Development Project, which supports small infrastructure and economic projects designed and implemented by villagers each kecamatan, or subdistrict, comprises about 20 villages), is an integral part of this decentralization and reform effort.

1.1.2 The innovative approach of KDP and its predecessor, the Village Infrastructure Project, was the result of a confluence of factors in Indonesia and in the Bank.

KDP is an outgrowth and elaboration of the Village Infrastructure Project (VIP), initiated in 1995 in response to the Governments concern about increasingly dangerous levels of social unrest. The VIP and KDP projects marked a change in the Banks thinking about poverty reduction, which had begun to shift due to a confluence of factors: (i) disappointing results worldwide with poverty projects managed by central government line agencies; (ii) strong criticism from the NGO community that Bank money in Indonesia was not reaching beneficiaries, but was being siphoned off by corrupt officials; (iii) a growing literature on the importance of developing (or at least not working against) local social capital, and on the need for beneficiary ownership if projects are to be sustainable; (iv) a recognition that earlier projects in Indonesia with (what were then considered minor) elements of community participation had higher levels of beneficiary satisfaction, better maintenance of infrastructure, and other more encouraging results.

As the Bank was beginning to debate all of these issues, the Suharto Government asked, in 1994, for assistance with its new poverty program, the Program for Villages Left Behind (IDT), which aimed to quell the growing unrest in rural areas by making block transfers to villages. As in past Bank-supported projects, the funds were to be controlled by government officials, while the Banks role, aside from providing resources, was to be limited to monitoring. Because of the factors noted above, however, as well as pressure from reform-minded Bank staff, particularly social scientists in the field, the Bank chose not to participate in IDT, but instead to launch its own rural poverty projectthe Village Infrastructure Project for Java (VIP 1). The design of the project was significantly influenced by a study of local-level institutions carried out during project preparation, which found that self-help projects were a normal part of village life, but were constrained by official corruption and bureaucratic regulations (see Annex 2 on LLI study). In a radical departure from the line agency approach, and from a parallel project on Sumatra bythe Overseas Economic Cooperation Fund (OECF), which was using contractors for infrastructure works, VIP 1 (1995-1998) aimed to reduce poverty by fostering participation, transparency, and decentralization at the village level. The project was carried out on Java, where villages had a strong tradition of self-help, and villagers chose from a menu of possible infrastructure projects. Villagers who contributed their labor were paid in cash, as had been the practice in an earlier infrastructure project carried out with the International Labour Organisation (ILO)thereby breaking with government practice of requiring village laborers to work on infrastructure projects for free. To ensure true transparency, all project accounts were posted on bulletin boards in the villagesand this proved crucial for creating trust in the project. To ensure true decentralization to more than 1,000 target villages, the project systematized a set of basic rules for disbursement to the villages from local branches of a major bankand this simple disbursement system proved to be a core element in the rapid and successful scale-up when the economic crisis hit during VIP 2 (1996-2000) and KDP 1 (1998-2002), with the latter becoming the countrys main program for community-based relief as the poverty rate climbed toward 50 percent.

In addition to these important new practices, VIP, and later KDP, were also based on innovative elementsand some difficult lessonsfrom several earlier poverty projects in Indonesia. In particular:

The Kampung (Urban Slum) Improvement Program (KIP, funded 1974) was initiated, without Bank involvement, by the Governor of Jakarta in 1969. It was financed one-third by the central government, and two-thirds by local governments. From 1969 to 1974, KIP brought communities into the planning, implementation, and maintenance of water supply, sanitation, primary health, and education facilities, as well as roads and footpaths. The Bank became involved in 1974 and provided 50 percent of the program funds; and the participatory approach was eliminated in favor of strengthening the Ministry of Public Works and the infrastructure departments of local governments. When Bank funding ended in 1984, local governments took over 100 percent financing of the program, and the participatory approach was revived. The Bank became re-engaged with the program in 1990, this time with an appreciation of what was coming to be called community-based development. The new loan included support for: (i) community development coordinators, to train local leadership in each kampung; (ii) establishment of community-level working groups on sanitation, garbage management, and management of clean water supply; and (iii) self-financing groups in the kampungs, which provided seed money for small-scale enterprises and help create new jobs. KIP is now one of the worlds largest and most successful urban poverty programs, and many of its projects are considered best practice. VIP and KDP incorporated the elements of beneficiary participation, community-level training and facilitation, and support for economic activity through local funding groups.

A series of locally managed small irrigation projects on Java (late 1960s - early 1990s), some carried out with the Food and Agricultural Organization (FAO), included grassroots participation in provincial-level planning and design, employment of villagers for construction, and user responsibility for maintenance. VIP and KDP adopted the practice of paying villagers for their labor.

The Yogyakarta Upland Area Development Project (1992) provided credit and grants for productive investment by upland hamlets and villages, as part of a broad effort to develop the agricultural economy of the uplands area. VIP and KDP adopted the practice of making villagers the subjects, not the objects, of development.

The Water and Supply and Sanitation for Low-Income Communities Project (1993) included villagers in decisionmaking about service levels within the funding allocation, and in mobilizing cash and in-kind contributions to further upgrade the standards of the works. In addition, as a technique for involving women in the project, participants in the initial womens meetings in each village were given responsibility for poverty mapping, which included determining the criteria for poverty in the village, identifying its root causes, and constructing a color-coded map showing the location of poor households. Womens meetings and poverty mapping were adopted by both VIP and KDP as the earliest core activities in target villages.

1.1.3 KDP 2 aimed to reduce rural poverty through a program of village empowerment and local governance reform.

Summary of objectives and description, capturing key CDD elements, both means and ends, and their initial quantification.

The Banks approval and the Governments acceptance of the Kecamatan Development Project represented the institutionalization of community-based planning for poverty reduction, which had been considered experimental under the Village Infrastructure Project. KDP 1 was appraised during the turbulent last spring of Suhartos regime (March 1998), and began operations in the summer. Suhartos hand-picked successor, B.J. Habibe, assigned high importance to the project, seeing it as a key part of not only the countrys poverty reduction strategy, but also its anti-corruption strategy, through its focus on more transparent and accountable local governance. The project originally targeted 725 kecamatan, comprising about 14,000 villages, but the currency devaluation that accompanied the economic crisis had the effect of doubling the projects budget, enabling KDP 1 to eventually reach more than 1,000 kecamatan, or 20,000 villagesa total of about 35 million peoplewith some 50,000 infrastructure, economic, and social projects. By the time KDP 2 was initiated in the spring of 2001, two months before the impeachment of Habibes successor, President Wahid, the project had gained so much credibility with the Bank, the Government, and the Indonesia population that KDP 2 was able to broaden its scope to include more intensive work on local governance as a key element in poverty reduction, in addition to targeting an additional 10,000 villages for infrastructure and economic activities. KDP is now active in nearly one out of four villages in Indonesia.

The following sections on project design, implementation, and lessons learned focus primarily on KPD 2 and the issues involved in scaling up to KDP 3, which is about to be launched. However, VIP and KDP 1 will also be discussed where appropriate.

The objectives of KDP 2 were to:

Support participatory planning and development management in villages;

Support a broad construction program of social and economic infrastructure in poor villages; and

Strengthen local formal and informal institutions by making them more inclusive, accountable, and effective at meeting villagers self-identified development needs.

These objectives were to be achieved by involving villagers in a process of democratic decisionmaking, which was to continue through every stage of the projectfrom hamlet and village-level development meetings to identify collective needs; through the villagers design of infrastructure projects and economic activities that would benefit the entire community; to the election of representatives to the inter-village forum, to vote on which projects in the kecamatan should be funded; to the requirement that all project accounts be posted in a public place, as a way to hold village leaders and elected officers of the local financial management unit accountable for every rupiah of project funds. The overarching purpose of this approach was to empower villagers to become agents in their own development, while demonstrating that the connection between poverty and poor governance could be broken by eliminating corruption from the funding equation. Results were to be measured in terms of economic outputs and impacts from community investments; changes in the ability of communities to plan and manage development projects; the increasing involvement of civil society in monitoring development projects; and the increasing interest of local government in responding to community needs.

1.2 Specific elements and their design

1.2.1 At the community level, the project focused on socialization, facilitation, and technical support.

The project included a number of design elements that in KDP 1 had proved crucial to developing villagers capacity to select and carry out projects in a democratic manner, and to hold local financial managers accountable for their handling of project funds. KDP 1 provided a list of possible projects; an important innovation of KDP 2 was to provide unconditional grants for an open menu of infrastructure projects, except for a short negative list, as well as low-interest loans for economic activities, as in KDP 1.

The elements were introduced sequentially so that the project was constructed in each village in an incremental manner, giving both villagers and facilitators a solid foundation for collective project activities and problem solving: Training of kecamantan-level facilitators, who then introduced the project in the hamlets and villages and provided support for village-level facilitators and operations. Most had been active in their own villages during KDP 1, and had applied for this salaried job with KDP 2. The kecamatan facilitators attend 18 days of formal training in a nearby city before going to the villages. The four-inch thick training manual covers the full range of issues involved in facilitating the project, including social psychology, methods of empowerment, mediation, gender equality, accounting, development of a logical framework for microcredit projects, and simple engineering for roads, bridges, and buildings (see Annex 3 for excerpts from the training manual). A six-month socialization and preparation process consisting of: Posting of project information, including recruitment notices for village-level facilitators, on a public bulletin board (see Annex 4). Applicants must have a high school diploma. They are interviewed, and, if approved, their names are submitted for election at the first village development meeting; Small group meetings at the hamlet level, where facilitators explain the projects open menu approach, and use colorful flipcharts (see Annex 5) and other materials to introduce the projects core principles of participation, transparency, competition, and accountability as a way to fight the nepotism, collusion, and corruption that are keeping them in poverty. The facilitators encourage participants to suggest ideas for projects, and give women the responsibility of making a poverty map of the village, based on local perceptions of poverty; A first village (multi-hamlet) development meeting, to which all villagers are invited by public notice, including police and local officials, to encourage their buy-in. The village head opens the meeting by thanking Allah, and introduces the kecamatan facilitators as friends who will guide you on the path to KDP. The facilitators say that KDP is a poverty alleviation project; that the money belongs the village, not the government; and that the villagers can get out of poverty by managing the money responsibly. They also discuss the core project principles at length, using graphics prepared by the national office, and take questions from participants. The election, from among the qualified candidates, one man and one woman to be village facilitators, who are then sent for training. Villagers also choose candidates for a project manager to coordinate with the kecamatan-level project manager; the latter serving as the Governments local link to the project, working out of the kecamatan-level office of the Community Development Agency under the Ministry of Home Affairs. The results of the development meeting are posted on the bulletin board; Special meetings with womens groups to discuss proposal ideas (women generally want clean water projects and funding for micro-economic activities, while men are generally more interested in road and bridge projects). A team is selected to prepare womens proposals for presentation at the second village development meeting; A second village development meeting, to discuss and prioritize proposal ideas and select teams for proposal writing, proposal verification, implementation, monitoring, maintenance of project-funded infrastructure, and cross-visits to villages where KDP is ongoing; all of the teams receive training, and cross-visits are carried out several times during the project. Also at this meeting, a project manager is elected. The results of the meeting are posted on the bulletin board; Competition for funding. Two or three written and verified proposals from each village (of which one is from a womens group) are presented by at the Inter-Village Development Forum, where they compete for funding with proposals from other villages in the kecamatan. Elected representatives from each village then collectively decide on which projects will best meet the development needs of the entire kecamatan by creating jobs, improving access to markets, helping the poorest families, or other criteria that are important to the villagers; Finally, release of project funds from the state treasury to the kecamatan-level financial units (UPKs), staffed by villagers who have been trained by the project in simple accounting. The UPKs release funds to the villages as needed to purchase materials and provide cash payments to workers involved in the chosen infrastructure projects. The UPKs also release the approved amount of money as loans to the winning micro-enterprise projects; each UPK decides on what interest rate to charge, and ensures that the loans are repaid on time. Implementation, with technical facilitators providing guidance on the procurement of high-quality materials at the lowest price, sound construction techniques, and maintenance; and social facilitators available to resolve any conflicts that might arise. Throughout the life of the project, the project teams, facilitators, and local officials report to the community on progress with implementation and the use of project funds. Updated project accounts and other information are posted regularly on the bulletin boards.1.2.2. The project has scaled up not only physically, but also socially and conceptually. KPD and its predecessor, VIP, were conceived as large-scale projects that would address the needs of hundreds, and later thousands, of villages at considerable speed. To achieve this objectiveand given the space created by the crisis to institutionalize a new approach to community developmentVIP systematized a set of basic rules for disbursing funds directly to villages, and disseminated a simple project manual covering the mechanics of project operations, including reporting, monitoring, evaluation, and procurement issues (the manual included procurement forms).These two elements, which were adopted by KDP, constituted the framework for the physical scale-up of the project; i.e., its ability to easily replicate the same proven disbursement and decisionmaking mechanisms in increasing numbers of villages, in what has been described as a kind of franchise operation. The physical scale-up was also made possible by the presence of professional engineers, who under KDP 1 were seconded to the project by Indonesian engineering firms, and under KDP 2 were hired by the project directly. The engineers, who worked at the district level, provided guidance for village infrastructure activities in a number of kecamatans. Using the simple technical manual provided by the national project office, they trained facilitators and project teams in the construction of low-cost roads (sand, stones, asphalt); bridges (steel beams with a wooden surface), water supply systems (pipes to bring water from springs or rivers to village water tanks), markets (permanent roof, water, electricity, toilets), and so on. They also taught project teams and facilitators about procurement issues, including how to solicit competitive bids, and how to judge the quality and quantity of materials when they were delivered. For KDP 2, engineers were hired directly by the project, and a number left their jobs to continue working with KDP or other community development projects. KDPs success in scaling up was not only physical, however, but also social and conceptual:

In terms of social scale-up, the disbursement and construction framework created the potential for empowering villages, and later clusters of villages (the kecamatans) with money and self-help tools, but the real empowerment came from changes in attitudes and behaviormost importantly, from villagers believing that they could make their lives better, and being willing to act on that belief. These changes were fostered by a number of design elements that gave villagers the experience of success by stages: the small group meetings and proposal writing; the poverty mapping; the open and inclusive meetings; the project teams; the locally controlled financial units; the cross-visits; the election of representatives to the Inter-Village Forum; the competition for funding (which forces villagers to prioritize their needs and prepare high-quality proposals); the financing for micro-businesses; the soundness of the infrastructure projects (from the procurement of high-quality materials at a good price to the collection of user fees); the cash payments for workers; the extensive training for facilitators, who then transfer their technical and social skills, including mediation skills, to the villagers; and the linkages with NGOs and universities that provide training and other support. Also of considerable importance were the projects mechanism for reporting corruption and its hiring of lawyers to bring charges against offenders, which has resulted in the prosecution of a number of village and kecamatan officials, often with the assistance of local police who have internalized the idea that project funds belong to the community. All of these project elements have worked synergistically (like gears of a bicycle, one official explained at a village meeting) to increase villagers hope for the future, and the skills and confidence to act on their own behalf. As a result, communities have begun to reach out to other villages and other sources of assistance; and both men and women who started as village facilitators have stayed with the project through successive stages, bringing their experience to other parts of the country and training the next generation of facilitators. Others have left their jobs as teachers, traders, or engineers to become full-time community development workers; and still others, their world opened up by the learning in the project, have gone back to school to pursue college degrees. Several have been elected to district parliaments. Local officials are now highly conscious of their relationship with villagers and of the need to avoid even the appearance of corruption or nepotism; and virtually all (except those accused of corruption) believe the project has improved their villages and enhanced their reputations. Those without KDP are asking for the project to come to their villages, and many district parliaments have voted to fund part of the (new or continuing) project in their kecamatans out of their own budgets. In terms of conceptual scale-up, the core principles of KDP have become synonymous, in the view of project participants, with democracy and decentralization. If a government program does not meet the KDP criteria of transparency, accountability, and participation, villagers often reject it, and demand to be consulted before another development program is brought to their village. From the government side, KDP has demonstrated the linkage between poverty and good governance, and the importance of community participation for the success of development projectsand the wide acceptance of these principles has led to KDP principles being used as the framework for many new poverty programs, both inside and outside of the country. KDP principles are also influencing the approach to poverty in, for example, Guinea, Vietnam, Cambodia, Laos, and Afghanistan, representatives of which have all visited KDP villages and have expressed an interest in having KDP-style programs. Finally, the programs best practice rating has given the Bank and other donors the scope to expand their community-driven approach to development. Another aspect of conceptual scale-up is KDPs evolution from a poverty/community development project to a governance project, as it will be under KDP 3 (see next section). As long as KDP was a poverty project it was legally restricted to targeting only the poorest 35 percent of kecamatans. But many districts (the level above the kecamatan) want to have KDP-style development projects in their non-poor kecamatans (which still contained many poor people). With the project now in the governance category, these kecamatans will be to buy the rule book and facilitators from the project to provide a framework for their self-funded or matching grant activities. The Government, project managers, and the Bank all see this approach as preferable to what would otherwise be a proliferation of micro-programs that would likely lose the focus and discipline that make KDP successful.

Finally, KDP has expanded the meaning of community development to include justice for the poor and conflict mitigation issues. Justice for the poor, which encompasses legal advocacy for villagers and anti-corruption activities, will be given more emphasis under KDP 3 (see next section and Annex 6). Conflict mitigation activities have become important components of KDP and KDP spin-off projects (as in East Timor) in areas suffering from separatist violence (see Annex 6). 1.2. 3. The next phase of the project will help create a more solid legal and administration foundation for village empowerment. KDP 1 and KDP 2, as community empowerment projects, were based implicitly on the idea of decentralization. For KDP 3, the project has been redefined as a governance project, with decentralization the main focus. This change in approach was determined to be necessary for two reasons: the increasing devolution of money and power to the districts, which will eventually control more than 40 percent of total public spending, and will be responsible for enacting laws and regulations affecting village autonomy and empowerment; and the persistent lack of microfinance funding by formal banking institutions, which has left the projects microfinance units as the only available option for many villagers. A number of these units have declared themselves independent after the project ended in their villages, and continue to fund community self-development using the interest they earn on loans. However, they lack legal status, and there are no regulations or guidelines to give them a framework for operating in a sustainable and prudential manner.

In light of these uncertainties created by the decentralization process, the third phase of the project aims to create: (i) a more solid legal and administrative foundation for village empowerment, in order to protect their autonomy, improve their capacity to represent themselves vis--vis higher institutions, and enable them to develop inter-village cohesion and a strong collective voice; and (ii) a rationalized management framework for community microfinance, to enable project financial units to continuing functioning, after the project ends, in a sustainable and prudential manner. In support of village empowerment, the project design encompasses:

technical assistance, at the national level, for the creation of binding outlines and best practice models for district legislation, to ensure that districts adhere to requirements for village autonomy in the decentralization law;

training for members of district parliaments in drafting consistent and transparent pro-village legislation, in managing resources, and in creating budgets that provide sufficient financing for independent village activities; support for the development of representative village councils, to replace or work in cooperation with (where they still exist) the more traditional council of elders; training in administrative and monitoring skills for village administrators;

civic information and education programs for villagers and village leaders, disseminated through group discussions, schools, religious institutions, and the media;KDP 3 also enhances village empowerment by supporting the creation of permanent, well-functioning inter-village forums, to give villagers a strong collective voice vis--vis high levels of government, carry out inter-village projects (such as roads and markets), and mediate inter-village disputes. In addition, the project provides for continuing anti-corruption efforts, which have been solidified in a Justice for the Poor component (see Annex 6). Justice for the Poor provides barefoot lawyers (young lawyers and interns) to help villagers document and prosecute corruption cases, and to act as advocates for villagers who need individual representation. In support of sustainable microfinance institutions, the project will support, at the national and district levels, the development of a consistent policy vision for microfinance, along with enabling legislation and prudential regulations. It will also provide technical assistance to the financial units, along with the supervision necessary for them to develop into sustainable community-owned financial service providers. Wherever possible, the project will also help develop linkages with banking institutions as other sources of support and financing. 1.2.4 The projects tools for community developmentparticipation, transparency, accountability, training, and technical supporthave been integral to the learning, implementation, and monitoring processes for all sector activities. The project elements discussed above (competition to create the best proposals, simple project operations and technical manuals, district-level training and technical facilitation, cross-village visits, monitoring of implementation by village-level project teams) supported activities in a number of sectors: not only infrastructure, microfinance, and governance, but also agriculture, livestock raising, water supply, trading, health clinics, and education (see Annex 7 for a description of two kindergartens). District-level engineers provided consistent support for infrastructure projects; for other sectors, particularly where facilitators did not have the necessary knowledge, the project design allowed for them to hire outside experts from NGOs and universities (many of whom had already contributed to facilitator training). Because of the projects community focus, it did not address any policy-level sectoral issues, except in the case of governanceand the project has had an important upward effect on this issue (see section above on conceptual scaling up). KDP 3, as a governance project, is developing additional tools to influence district and national policy in the governance and microfinance sectors. Some of these activities will not be community based. However, for village-level anti-corruption and governance monitoring activities, villagers will receive training and support from the projects Justice for the Poor program; and the financial units will receive focused technical support from the project and possibly from banks, to assist in their transition to independent community microfinance institutions. Section 2. Implementation Successes, Failures, and Challenges

2.1 Overview of implementation and scaling-up experience

2.1.1 The project has changed dramatically since VIP 1, with each new phase addressing empowerment and governance issues that emerged in the previous phase.

Viewed as a long-term program, the five stages of VIP and KDP together show a progression from centralized control to decentralization and democratization, with increasing village-level management of project funds and operations; more technical assistance and anti-corruption activities; increasing inter-village cohesion and gender equality; a growing willingness on the part of districts to provide counterpart funding; and a changing relationship between villages and district government. District government was heavily involved in VIP, kept at arms length in KDP1, and kept at arms length but included in the socialization process in KDP 2. In KDP 3, which coincides with the second major decentralization, district parliaments will control village budgets, decide on matching funds for project activities, and be responsible for drafting laws affecting village autonomy. A major project objective, therefore, will be to strengthen relations between villages (and inter-village forums) and the districts. In terms of specific implementation and scaling up issues:

VIP was considered a large-scale experiment, based on emerging evidence from smaller projects (see section 1.1.2) that villagers might be capable of constructing and maintaining their own infrastructure works. Villagers ostensibly controlled decisionmaking, implementation, and financial management, but in reality the central government was involved in the daily workings of the project; district governments had final approval of village activities; and monitoring, consisting mainly of surveys, was done mainly by outsiders. Nevertheless, VIP received high ratings for ongoing learning by doing, village participation, well-conceived project design, strong government commitment, good leadership by individuals involved in designing and implementing the project, and excellent supervision and engineering support. The project also exceeded expectations in terms of number of villages reached, amount of infrastructure constructed, number of jobs created (1,942,144 persons worked on the project for 49.22 million person-days), and economic rate of return. As the project evolved into KDP, it was able, due to the economic crisis (see section 1.1.3), to focus more on governance as a key element in poverty reduction. Although not stated explicitly in the project documents, the conceptual changes in KDP, based on the assertion of a poverty-governance link (see section 1.2.2), were driven mainly by government corruption and misappropriate of project funds. In other words, project managers claimed they could be more successful in reducing poverty and fostering community development if the government werent stealing project money. Given the Governments reliance on KDP to channel money quickly to the villages to quell social unrest, it was in no position to refuse the resulting design changes. These included a virtual exclusion of district officials from all project operations and processes; the introduction of kecamatan and village-level social and technical facilitators; the addition of informal members to village and kecamatan bodies, unrestricted block grants, with absolutely no interference with villagers choice of projects; introduction of a complaints database, and of anti-corruption monitoring by NGOs and the Association in Independent Journalists (which had been illegal under Suharto); and aggressive prosecution of corruption cases (a particularly sticky point during negotiations). KDP 3 does not change the village-level design elements, except for assisting the financial units in becoming free-standing microfinance institutions. However, it adds elements to strengthen inter-village cohesion, train district parliaments in drafting legislation, and foster joint planning between villages and district branches of line agencies in health, education, irrigation, and other centrally funded activities. The main differences between the community empowerment and governance strategies in VIP and KDP are shown in Table 1. Table 1. Progressive Strategy for Village Governance Reform in VIP and KDP

Decentralization/

democratization issue

VIP 1 and 2

(1995-1998, 1996-2000)KPD 1

(1998-2002)KDP 2

(2001-2003)KDP 3

(2003-2006)

Selection of form of village governmentStandardized, based on national lawUse of standard, pre-existing formal and informal groupsAddition of non-voting members to village and inter-village forumsNational and district regulations to support village and inter-village institutions

Strengthening village leadershipDe facto selection by districtAddition of informal members to village and subdistrict bodiesVillage leadership training, joint monitoring with members of district parliaments

Elected village parliament and inter-village forums

Revenues provided by project 3-year block grants to villages for menu of project choices, plus one-year extension during which project changed from a targeted program to a recurring budget program 3-year unrestricted block grants to kecamatan-level financial units for village projects 3-year unrestricted block grants to kecamatan-level financial units for village projects2-year block grants to complete 5-year cycle in KDP 1 and KDP 2 villages that have good maintenance of infrastructure and well-functioning financial units

Counterpart funding from local governmentNoneNone Matching grant pilotMatching grants standardized for all districts

Funding decision for community projects

Proposals approved at district level or higherKecamatan KecamatanKecamatan

Village infrastructure needs assessment

By sectoral agenciesProject specificVillage-wide assessmentVillage-wide assessment

Relation to district government

Reporting to district executive (and higher); projects approved by district engineers Reporting to district executive (and higher); projects approved by district engineers

District executive has no decisionmaking authority; but executive and members of district parliaments included in village socialization process

Strengthening of district parliaments capacity for local governance, including the drafting of sound legislation related to village empowerment and autonomy

Relation to line agencies

District-level line agency branches (dinas) provide all technical services; projects supervised at dina level or higher

None Dinas present plans to inter-village forums presentations Joint dina-village planning for specialized services (health, education, irrigation, etc.)

Microfinance

Subsidized, directed creditCommercial interest but low repaymentLimited capacity strengthening to standard project financial unitsTechnical support and supervision to free-standing institutions; no new loan funds; private bank linkages

Grievance and dispute resolution

Complete domination by executiveIntroduction of complaints database and monitoring by press and NGOs; national and regional offices respond to complaints in investigate corruptionContinuation of complaints database and NGO and press monitoring; barefoot lawyer / pilot paralegal services in villages to respond to complaints and investigate corruption

Continuing NGO, press, monitoring and paralegal program, and prosecution of corruption cases; introduction of extended community-based monitoring

Gender equality

Women defined by household roles

Promotion of womens participation in decisionmaking; women facilitators

Special planning stream for womens groups; competitive reward for promoting womens participation; women engineers program

Support for women in local government

Source: Adapted from the Project Appraisal Document for KDP 2 ((May 23, 2001), and the draft Project Appraisal Document for KDP 3 (March 15, 2003).

2.1.2 Project outcomes and impacts were mixed, but overall were highly satisfactory.

The mission assessed a number of infrastructure projects, economic and social projects, and empowerment/governance activities, through interviews and focus groups with several dozen project staff and beneficiaries. The results in all the sample villages were extremely positive, but field reports, aides-memoire, and the draft ICR for KDP 2 give a more balanced picture: Infrastructure achievements were greater than expected, with at least one significant infrastructure project in each KDP kecamatan. About 35,000 km of roads built or upgraded (250 percent more than specified in the PAD), as well as 3,500 bridges, 5,100 clean water and sanitation units, 400 public markets, and 260 rural electrification schemes. The projects generated 25 million workdays for more than 2.8 million villagers, with community contributions, in cash and in kind, averaging about 17 percent (even matching or exceeding KDP funding in some areas). The projects cost, on average, about one-third less than equivalent government projects, and their economic rate of return averaged about 60 percent. Villagers were required to have operation and maintenance plans and committees in place once the infrastructure projects were completed, and field reports indicate that 86 percent of infrastructure built during the first year of KDP 2 is still being maintained, either by the O&M teams (94 percent) or independently by community members. Field studies and household surveys show a high level of satisfaction with the infrastructure projects, which have opened up opportunities in villages and kecamatans by improving access to markets, town centers, education and health facilities, and clean water systems, which by themselves have saved an estimated 50 million person days in womens labor. The mission found villagers to be extremely proud of their infrastructure projectsnot just the structures themselves, but also of the process by which they were decided upon, designed, and built. Many see these projects as a tangible symbol of democracy coming to their villages, and of their empowerment to carry out infrastructure projects on their own in the future. Economic activities were judged by project managers to be unsatisfactory, based on a country-wide repayment rate of only 45 percent. More than 18,000 groups, representing 280,000 people, mostly women, received micro-loans to help finance activities such as trading, savings and loan groups, and home manufacturing of toys, bricks, backpacks, dried fish, tofu and tempeh. The participants in these activities enjoyed increased income and increased links with traders who sold their products in larger markets;, but aside from creating a small number of jobs, the activities seem to have had little village-wide effect. Moreover, supervision missions found many cases of poor fund management, and of beneficiaries not wanting to repay the money, which they saw as government money to which they were entitled. Financial unit managers often had to go to peoples houses to collect their payments, or use social pressure to shame them into paying. There were also cases of financial unit managers stealing project money, in one instance in collusion with a facilitator. Many of the villages with such problems were not allowed to finish the three-year project cycle, and none has been included in KDP 3. On the other hand, some financial units did extraordinary work, which could not have been captured by standard indicators. Particularly in Central Java and Yogyakarta, where the Javanese tradition of village self-help is still very much in evidence, some financial units developed, on their own initiative, special games and other methods to reach the very poor (see Annex 8), who had been written off as unreachable in most project villages. For example, in one kecamatan, the financial unit, which had declared itself an independent entity after the project ended, hired a facilitator to help a group of eight very poor men and women to become goat farms, and another group to become duck farmers. These people were living in the mountains in dirt-floored huts and had never heard of the project. The facilitator took them to visit working farms, taught them how to keep simple accounts (which were written, in the goat-raising group, in childrens lesson books), brought in experts to teach them how to care for the animals, and met with them regularly to guide their efforts. Both groups repaid 100 percent of their loans within a few months from the sale of baby goats and ducklings. For these people, the additional efforts of the financial unit literally changed their lives, and there are similar examples. Social activities were infrastructure and economic activities designed to improve health and education. These activities were not actively promoted under KDP 2s open menu approach, and villagers generally did not propose them. As a result, out of 50,000 projects across the country, only 140 village health posts and 475 schools were built or rehabilitated, which project managers considered disappointing. However, where such activities were carried out, they had significant impact, particularly the kindergartens (see Annex 7). The wealthier financial units also provided a total of 380 scholarships for students and 85 grants for school equipment and materials. Despite the limited output in these areas, the project created important linkages with local offices of the health and education ministries, many of which are now engaged in joint planning with the villages. Empowerment and governance activities were successful as far as they went, but both villagers and local officials have indicted that they want more training. Villagers were to be empowered by working to make the projects principles of transparency, accountability, and participation a reality on the ground. In fact, their awareness of and believe in these principles often resulted in frustration because they perceived that they did not have enough money or training to continue or increase the scope of work they felt was important. The staff of every financial unit seen during the mission wanted more training in accounting; micro-enterprise groups wanted more training in how to manage and save money, and more help in marketing; facilitators wanted more training in engineering, and so on. Project managers, for their part, report that KDP fell short in training facilitators in a number of competencies that are necessary for fuller empowerment: community facilitation, the inclusion of women and marginal groups, field supervision, technical and engineering skills, project management, and monitoring and reporting. However, even the level of empowerment that was achieved caused local officials to worry about how villagers were perceiving them, and to change their behavior. In addition, some local branches of central ministries are now encouraging villagers to participate in district-wide planning. 2.1.3 The assumptions made at the planning stage were largely accurate, although some of the risks did not materialize. The projects development goals were in line with the CAS objective of empowering and investing in the poor, and with the Governments objective of reducing poverty through bottom-up programs. As predicted, problems were reported and recorded in the database (which now has thousands of entries); and villagers were willing to make contributions, in cash and in kind, to project activities. In terms of critical risks, the countrys macroeconomic problems actually helped rather than hurt the project by effectively doubling its budget for one year, and by making available professional engineers who had lost their regular jobs. Other risks, however, did have negative impacts, particularly separatist violence in Aceh and East Timor, which forced facilitators to abandon those areas. The risks of politicization of local institutions and of takeover by technical agencies did not materialize under KDP 2, but with greater power being devolved to the districts, these are even greater risks under KDP 3.

2.1.4 Assessment of the evidence for success [2]

The mission findings were based on a small number of villages in Central and West Java in which road, water supply, micro-enterprise, and school projects were considered by project managers to be good examples of success. In-depth and interviews and focus groups in these villages could not turn up any serious problems, except for the theft of money from one financial unit (see note 20), and villagers spoke about that as a success in fighting corruption. Supervision reports and aides-memoire, however, went into great detail about problems encountered in the field: people receiving loans under false names; poor bookkeeping; money missing because of price mark-ups on construction materials; a facilitator being pressured into signing an agreement by the kecamatan head, who in turn claimed that he was pressured by the district head; a group fish-raising project failing because profits had to be divided among too many members; bridges not being strong enough because the project team bought inferior concrete and steel rods; roads not being finished, or cutting through forests (which the project prohibited); and so on. These problem were not hidden, but were readily reported. With regard to the projects overall method of supervision and the robustness of its reporting: the project was initially criticized for not adhering to the Banks standard reporting procedure (quantitative data input into an inflexible PRS form); but Bank reviewers later agreed with the project managers claim that the PRS form was not well designed for CDD projects, particularly for performance indicators, and recommended that the projects multi-sectoral, thematic model of CDD supervision be adopted for the entire CDD portfolio. The KDP instrument consists of: (i) case studies documenting lessons learned; (ii) field monitoring by members of district parliaments; (iii) community participatory monitoring in every village; (iv) monitoring contracts with 40 NGOs and 31 journalists (v) an impact survey of 4,600 households; (vi) yearly financial audits of 30 percent of the kecamatans; and, as noted above, (vii) supervision reports (which result in rapid follow-up action); and (viii) aides-memoire that focus on implementation problems and constraintscorruption, management capacity, quality of facilitation, participation of women, maintenance of infrastructureand provided suggestions for improvement. The instrument also made use of data from the governments National Expenditure Survey. This broad-based approach not only captured standard progress indicators, but also allowed for quick corrective action (ineffective facilitators being fired, corruption being exposed); for the refinement of processes and operations (a separate stream for womens proposals, more resources shifted toward training); and for the exploration of new hypotheses and issues unearthed in the field (such as the possible need for a legal assistance program for communities, and for conflict mitigation elements in the project in some areas). 2.2 Factors for success or challenges to scaling-up

2.2.1 Participation and participatory processes were intrinsic to KDP, since the projects overarching purpose was to empower and develop the capacity of villagers. The project was designed to maximize opportunities for village empowerment created by the political and economic crisis, and by two major factors in particular: the new governments strong commitment to decentralization, and related to that, its need to channel resources down the villagers as quickly and effectively as possible, to give the rural population a stake in the new system and prevent further violent uprisings. Without this external enabling environment, the highly participatory nature of KDP in 20,000 villages would not have been possible. Rather, KDP, if it had continued, would have faced the same external barriers to scaling up as VIP: the (former) governments insistence that projects be approved at the district level, that funds be controlled and disbursed at the national level, that women remain in traditional roles, and that all grievances be presented to the head of the district, which villagers considered dangerous. The only major external barrier to scaling up was the pervasive corruption in the country, which resulted in missing project money and a lack of trust in local officials, who controlled institutions that were important for sustaining village empowerment. These concerns were addressed by inviting local officials and police to village meetings, where they all received the same training in the principles of transparency and accountability. Project managers also insisted, during negotiations, on the right to prosecute corrupt officials, which they felt would be an important statement to villagers, and the Government reluctantly agreed. In terms of internal barriers to scaling up participation, there were two major issues: the reluctance of women to speak at meetings, out of fear they would not be taken seriously; and the virtual exclusion of the very poor from all aspects of the KDP process. The gender bias of the decisionmaking process had been recognized during KDP 1, which had provided for an equal number of men and women facilitatorsgenerally a male technical facilitator and a female social facilitatorbut had done nothing to ensure that womens proposals were funded. KDP 2 remedied that situation by involving women in poverty mapping and instituting a separate planning stream for womens projects, with a facilitator to assistance in womens groups in proposal writing. Further, KDP 2 required that at least one of the proposals (out of two or three) sent to the kecamatan to compete for funding had to be from a womens group. (Women could also be part of mixed-gender groups, but proposals from those groups did not count as womens proposals.) In addition, in recognition of their own gender bias in hiring staff, project managers in KDP 2 sought out women engineering students at universities to hire as technical facilitators, and initiated social facilitation training for their male counterparts. The joke in project villages was that PPK (the projects acronym in Indonesian) stood for Women Without Enough To Do. In reality, however, women who made an effort to participate were well accepted and regularly elected to important positions, including management of financial units. The exclusion of the very poor was a much greater problem, since barriers to their participation were rooted both in the project design and in a deep-seated bias against the very poor on the part of project staff. As to the first point, although the project was defined as a poverty project, in reality it was a multi-sectoral empowerment effort that did not include any poverty targeting, beyond locating the project in the poorest 35 percent of kecamatans (based on government statistics) and assigning women to do poverty mapping of their villages. There was a pro-forma requirement that in selecting projects to submit for competition, villagers had to consider whether they benefited the poor; but all of the villagers considered themselves poor, and there was no requirement to consider the very poor, who were largely invisible. Moreover, even the few regional project managers who had designed methods for reaching this groupon their own initiative and outside of normal project channelsdid not believe the very poor had the ability to think or speak for themselves. For example, the mission visited a kindergarten where a group of very poor mothers had come to be interviewed at the request of the teacher. The regional manager, who had been an advocate for the very poor, was translating between English and Javanese, but he spoke only to the teachers and ignored the mothers; when asked to translate a conversation with the mothers, he said they wouldnt be able to say anything meaningful. When pressed to ask the mothers what they thought they needed to make their lives better, they responded, with one voice, everything. When the mothers were asked what kind of future they wanted for their children, they said, in this order: teacher, soldier, doctor, lawyer. (More positive examples of work with the very poor are discussed in section 2.1.2 and Annex 8.) In recognition of the need for more outreach to vulnerable groups, KDP is now spinning off a project targeting widows and orphans, but there is still no KDP program that targets the very poor.

In the projects defense, poverty targeting is an enormous undertaking that would have interfered with KDPs more urgent goals, in Indonesias chaotic political environment, of building villagers capacity to manage their own development and create sound local governance institutions before the window of opportunity closed. It would have been difficult, for a variety of reasons, for the project to explicitly exclude the very poor, but as long as KDP was a poverty project, it perhaps would have been useful to create a separate planning stream with intense facilitation, or to link with a project that did focus on this population, so that their exclusion from the participatory processes of KDP would not have seemed so egregious. Now that it has become a governance project, however, this is no longer an issue in KDP 3. 2.2.2 Social and political challenges

The main social challenges in scaling up KDP, other than the challenge relating to the very poor, were the projects relationship with traditional institutions and customs, and the difficulties of working in conflict-ridden areas. On the first point: the project design provided for working with and through traditional institutions, as a way to gain villagers trust and support the reemergence of local leadership, which had been decimated during the Suharto era. In reality, however, many traditional village councils were composed of old men who had a vested interest in the status quo, including the ability to demand bribes from villagers, material suppliers, etc.; and who saw the projects principles of transparency and accountability as a threat to the limited power they still had. Thus the project was in the position of having to find a way to function not only outside of central government line agencies, but outside of traditional institutions as well; of wanting to channel money directly to the villages, but having to keep it out of the hands of traditional village leaders, who expected to control it. Further, the projects prohibition against funding religious buildings, as a way to avoid religious and ethnic conflict, was a barrier to developing strong working relationships with religious leaders who could have acted as a counterweight to corrupt village elders. The task, then, was for the project to develop a new generation of leaders who believed that transparency, accountability, and participation in public life were the key to a better future. In fact, many project facilitators in KDP 2 managed to get onto village councils as non-voting members, and KDP 3 will provide support for the creation of an elected village parliament. Other former facilitators have been elected to district parliaments, where they will receive training under KDP 3 in the drafting of legislation related to village empowerment and autonomy. The second social challenge was villagers resistance to the projects requirement for competition, to which they had a strong aversion. This was particularly apparent in the Javanese areas visited by the mission, where traditional community processes have operated for centuries to minimize social conflict and maximize cooperation. Many villagers did not want to participate because they could not accept the idea that there would be winners and losers, and they had to be persuaded, over a period of weeks, that competition was the democratic way to fund the best proposals out of limited project resources. Competition at the kecamatan level did, in fact, create inter-village tensions; once the veneer of harmony had been broken, there were loud arguments and physical fights, and some of the losers, including one village head, were too ashamed to return home. On the other hand, in keeping with their tradition, many winners offered to incorporate losing projects into their own projects, which created stronger group cohesion and, in many cases (as with road projects), helped to foster inter-village linkages. KDP 3 will build on this tendency toward cooperation by strengthening the informal inter-village decisionmaking bodies that had been assembled to vote on project funding into permanent inter-village forums. The project faced the opposite problem in conflict-ridden areas, where different factions could not be persuaded to stop killing each other, let alone compete on a friendly basis for project funds. In some of these areas, such as East Timor and Central Sulawesi, where facilitators were being threatened by all factions and also by government troops, the project had to be discontinued (although a new spin-off project is currently being developed for East Timor. In other areas, such as Aceh and Papua, the project has become one of the few vehicles for conflict mitigation by providing a framework for negotiations and consensus building. In these and five other conflict-ridden provinces, the project design has been modified to fit local circumstances. In Aceh, for example, a special operations manual provides facilitators with guidelines for maintaining transparency and open communication among all parties. And the special operations manual for Papua emphasizes the importance of using village heads and tribal and religious leaders as advisors to the project, to assist in solving problems and conflicts. To deepen and enrich its conflict-mitigation work, the project is currently carrying out a study to determine: (i) what factors affect local capacity to manage conflict, (ii) how boundaries between different groups are constructed and sustained, (iii) what types of conflict can mediated by more inclusive, transparent, and accountable local institutions; and (iv) how different actors (villagers, local leaders, facilitators) together negotiate, or fail to negotiate, different types of conflicts in different settings.

2.2.3Decentralization processes and institutional issues factors in success or challenges to scaling upKDP included a number of decentralization elements designed to empower communities in their relationship with local government. These elements were added to the project incrementally over the three phases of the project, as external circumstances made it possible to do so. Under KDP 1, when the governments main concern was channeling money to the villages to mitigate poverty and social unrest, the project was able to incorporate elements giving villagers the right to assess their own infrastructure needs, and to control project funds and project choices (as they had not been permitted to do under VIP), with no interference by district engineers, village heads, or any other government official. KDP 2, during the unstable last months of the Suharto regime, was able to incorporate decentralization elements that were much more far-reaching (see Table 1). In fact, KDP 2 represented a complete change in focus, away from using infrastructure projects to create employment and alleviate poverty, and toward using them to increase villagers capacity for project planning, implementation, and monitoring, as key skills necessary for self-directed development and an empowered relationship with local government. As discussed above, the projects internal processes for empowering villagersopen meetings; training in the principles of accountability, transparency, and accountability; community monitoring; technical facilitation, election of representatives; inter-village funding decisions, prosecution of corruptionhad a significant effect on villagers perception of their own rights and abilities, which enabled them to move outward and demand more transparency, better services, and joint planning from the institutions above them. Other decentralization elements in KDP 2 had a more direct external focus, with the aim of creating an institutional framework that would allow for, and financially support, village empowerment and autonomy. Under that phase of the project, district officials and members of local parliaments were included in the socialization process and invited to participate in joint monitoring missionsin direct contrast to KDP 1, from which they were excluded due to corruption and fear that they would dominate the planning process. The design of KDP 2, however, recognized that village empowerment and autonomy would not be sustainable without local government support, and provided a learning ground for local governments to become real stakeholders in poverty alleviation and pro-poor investment efforts. An important forward-looking aspect of that approach under KDP 2 was to offer districts a chance to buy additional coverage by providing matching grants, and nearly ____ percent of the district parliaments voted to do so. Under KDP 3, financial participation will be mandatory for all districts that have villages involved in the project. KDP 3 will be operating in a very different institutional and fiscal environment than KDP 2, since the new decentralization laws (see notes 11 and 12) give the districts control over 40 percent of public spending, and require them to regulate village government in 13 separate areas that go to the heart of village autonomy and empowerment. These include, in summary, how village heads should be elected; how village councils should operate and who may be elected to them; how informal village institutions should be created; how village budgets shuld be drafted; and how inter-village cooperation should function. The uncertainty about what kinds of regulations would be issued was a major constraint in designing the village empowerment activities of KDP 3, until project managers decided to pro-actively address the potential problems this situation held for villages by focusing on local governance directly. The project design now being negotiated (June 2003) includes: (i) training for district officials in poverty alleviation and community-driven development, (ii) technical assistance for district parliaments in drafting laws that support village autonomy and empowerment, and (iii) assistance in drafting budgets that provide discretionary funds to villages to use for self-identified needs, and allow village control of contracting and procurement. Project managers expected this approach to meet resistance at both the district and central levels, but enthusiasm for the design of KDP 3 has been much greater than anticipated. In terms of other decentralization issues, KDP 3 continues to support the development of inter-village forums to fill the gap left by the decentralizations disempowerment of kecamatans, which had mediated between villages and districts on a variety of issues. The inter-village forum is envisioned as a permanent body, with elected representatives from a cluster of villagers who will speak with one voice to higher levels of government, and will oversee inter-village development. There is one major area, however, in which the decentralization elements in KDP 3 fall shortother than promoting linkages between the financial units and commercial banks, the project does not assist villages in developing other sources of revenue, to make them less dependent on transfers from district budgets. 2.2.4 Scaling-up logistics The project used several strategies for scaling up, each of which is evaluated below in terms of its state of practice:

Direct organizational growthbest practice. The projects original and most important strategy for scaling up was to systematize a set of basic rules, especially for the disbursement system, that would allow for the KDP model to be replicated in hundreds, and then thousands, of villages within a short period of time, using non-experts (villagers) as financial managers. Early in the scaling-up process, this model had the effect of creating demonstration projects all over the country, and provided evidence from multiple settings and many expert reviews that projects controlled by villagers, both operationally and financially, could be successful. Lessons of experience were integrated into organizational learning (seminars for project managers and staff, internal studies [see note 27], facilitator training), and disseminated to government stakeholders, and necessary corrections were made quickly, both at individual sites and project-wide. On a number of occasions, project resources were shifted from statistical studies (which will now be carried out under KDP 3), toward additional training, with the agreement of the Minister of Finance. Indirect organizational growthgood practice. The KDP model for community-based development has been spontaneously adopted by a number of rural poverty, urban poverty, and education projects in Indonesia and other countries (representatives from government and NGOs in Guinea, Vietnam, Cambodia, Laos, and Afghanistan have all visited project villages; and KDP spin-off projects are now being prepared in Cambodia, Laos, and Afghanistan). In KDP 3, non-participating districts will be able to buy the KDP rule book, manuals, and facilitator services and finance KDP-type projects out of their own resources. KDP 3 is also spinning off its financial units into independent micro-enterprise institutions that will operate according to prudential microfinance principles. However, the project has not catalyzed partnerships or fostered joint ventures, instead relying on NGOs, universities, and other possible partners as expert resources and project monitors. Direct institutionalizing, mainstreamingbest practice. KDP 2 mainstreamed the basic principles of village empowermenttransparency, accountability, and participationinto village and inter-village institutions and practices. KDP 3s strategy for scaling up focuses mainly on ensuring that these principles are integrated into district-level policy and institutions, and that village autonomy and empowerment are protected and supported in district legislation. To this end, the project will provide training and technical assistance to district legislators, at district meetings and regional workshops. Indirect influence on institutions and policygood practice. Aside from the outreach work involved in scaling up and supporting spin-off and replication projects, KDP has not engaged in any significant awareness-raising activities, which project managers see as a weakness. Publicity has mainly taken the form of newspaper articles about the prosecution of individual corruption cases in KDP villages, written by journalists hired by the project (with the consent of their newspapers) to act as independent project monitors. Conferences, cross-visits, and direct lobbying have been aimed mainly at informing and influencing villagers, project staff, and government officials, but the general public still has little awareness of the project. Policy advocacy, however, is an ongoing activity, and has had an important effect on governments commitment to expanding the KDP model to a new generation of community-based development projects. As awareness of these projects has spread, an increasing number of communities are demanding transparency, accountability, and participation in projects being planned for their villages, and see their participation in such projects as a way to create democracy on the ground.2.2.5Total and or fiscal costs

The total original loan amount for KDP was US$225 million. .

Checklist 12 as to how the project fared financially, and the implications for scaling-up.

Susan need your help for this. 2.2.6 Co-production issues Stakeholders in the project (KDP 2 and KDP 3) include: villagers (members of project teams, officers of the financial units, elected representatives to inter-village forums)

village heads and members of traditional village councils; tribal and religious leaders in some conflict-ridden areas;

kecamatan heads; district heads and members of district parliaments; district-level line agency staff;

civil society organizations journalists

private sector actors (contractors and suppliers for infrastructure projects; traders and agents for economic projects);

the Government of Indonesia (the Ministry of Home Affairs and Regional Autonomy, Department of Community Development; the Department of Planning; the Ministry of Finance; the inter-ministerial coordination committee); the World Bank.The co-production relationships that have had the greatest impact on the projects ability to scale up are discussed below. Relationships among villagers. The most significant co-production issue, in terms of overall scaling-up impact, was the diversification of roles among villagers, based on their self-identification of the range of abilities present in their communitiesincluding the ability of women to be engineers, financial managers, and elected representatives. This diversification of roles was, in effect, the beginning of an embryonic but potentially broad-based leadership and institutional structure in the villages that could, given the proper enabling environment (see below), continue to develop and respond appropriately to internal and external issues. Critical to this beginning of village empowerment was the projects learning-by-doing training, which has helped a core group of activists to become nascent specialists in a variety of sectors (roads, water supply, livestock raising, microfinance), and has created the potential for them to play important roles in a future village government. Equally important was the projects rule of absolute non-interference with funding decisions, which gave villagers the experience of being responsible for their development choices, even those that project managers considered questionable (such as, for example, deciding to fund a micro-business before they had clean water supply). With regard to specialized roles and their importance for the project: Each infrastructure team had a foreman who was responsible for procurement and the quality of the works on the ground.

The village-level social and technical facilitators, selected because they were well-liked by the community, were responsible for making the initial approaches to village groups, and gaining their acceptance for the outside facilitators. Officers of financial units were responsible for disbursing all grants for infrastructure projects and loans for economic activities, and for keeping and publicly posting accurate and up-to-date disbursement and repayment information, including interest earned on loans. They also reported regularly at village meetings on how the funds were being used. In the well-functioning financial units visited by the mission, detailed running accounts for every project activity were posted on a wall in the (usually tiny) office, and computer-generated hard copies were also available (for this purpose, unit officers went to larger towns to rent time on a computer). In an environment where villagers were accustomed to development money being stolen or misappropriated, the transparent behavior of financial unit officers was the single most important factor in winning villagers trust and willingness to participate in the project. In cases where dishonest behavior became apparent later in the process, after villagers had become committed to the project, such behavior was seen as a betrayal and met with outrage, and villagers often took it upon themselves to investigate and bring charges against the offender. Under KDP 2, some financial unit officers took the initiative of creating and funding projects for the very poor, which they did not submit to the competitive process, funding these projects with interest earned on microfinance loans. Others declared their units independent and began to function as commercial microfinance institutions or savings and loans. The projects plan under KDP 3 to transform all financial units into free-standing institutions, and to provide technical support and foster commercial bank linkages, was in response to these spontaneous scaling-up actions. Linkages with commercial banks are an area of risk, however, due to the possibility of capture. Villagers elected to inter-village forums were responsible for trying to secure funding for heir communitys proposals, while at the same time considering the value of proposals from other villages. By working with 30 or 40 counterparts (one man and one woman from every village in the kecamatan) to prioritize needs and allocate project funds among the entire group of villages, and by fairly balancing competing interests, they became the primary agents of inter-village cohesion. The relationships, skills, and collective vision they developed through this process laid the groundwork for the forums to become the permanent inter-village decisionmaking bodies that are envisioned under KDP 3. Traditional village heads and council members were expected to be a source of resistance to the project, since they stood to lose power and money-making opportunities. That resistance largely did not materialize, due to the training provided specifically for this group as the project was starting, and to other factors that need more study. The support of traditional leaders helped to legitimize the project in the eyes of the villagers, and made it seem safe for them to participate. The symbolic role of the village heads was incorporated into village meetings (they introduced the facilitators), and they were given part of the credit for project successes.

Tribal and religious leaders are hired as special consultants to the project in conflict-ridden areas, using their position of trust with different factions to help them work cooperatively on project activities.

Relationships with external stakeholders. These relationships were largely negative during KDP 1, and presented a number of barriers to empowerment. In particular: (i) project funds flowed through line agencies (and up to 40 percent of the funds disappeared); (ii) village infrastructure needs were determined and technical services were provided by district-level line agency officials; (iii) funding decisions were made by district engineers; and (iv) district heads handled complaints about corruption and poor project management (see Table 1). These barriers to empowerment and autonomy kept villages in a subservient position vis--vis the central and district governments, and had the effect of making KDP 1 little more than an infrastructure project carried out with community labor. However, these relationships changed dramatically under KDP 2, when the new political environment made it possible to limit central government involvement to hands-off oversight and support by the Ministry of Finance and the implementing agency, the Department of Home Affairs (see below); and limit local government involvement to coordinating with central government and project facilitators. KDP 2 marked the beginning of the empowerment process, with its unassailable principles of transparency and accountability, which quickly resulted in an informal but very real power shift between villagers and district officials.

Kecamatan heads were government officials with the closest relationship to the villagers. While district heads were seen as remote, kecamatan heads were involved in day-to-day village issues. Before KDP 2 they were often accused of misappropriating or mismanaging money, but when the empowerment process began, many began to act as advocates for the villages and report favorably to district heads about the benefits of the KDP process. The kecamatan heads have been largely disempowered by the decentralization, and now are appointed by district heads instead of being selected by the traditional village councils. KDP 3s focus on strengthening the inter-village forums is designed to compensate for this power gap, since the forums will now be the only entities capable of mediating between the districts and the villages. District heads and members of parliament suddenly found themselves, under KDP 2, in the position of having to attend village meetings to defend their honesty and learn new behaviors. Their cooperative response to these changes made it possible for villagers to prove, without externally imposed difficulties, that they were capable of handling funds and development projects. In a synergistic upward spiral, their efforts, in turn, persuaded district parliaments to channel more money to villages in the form of matching grants. These matching grants had tremendous symbolic significance in KDP 2, marking the districts acceptance of villagers control of their own development activities. Under KDP 3, by the terms of the loan agreement with the central government, the matching grants will be mandatorythat is, the districts provision of development funds to the villages will be institutionalized in the revenue sharing structure for the remaining three years of the project. In the KDP 3 project design, these grants will be the single most important factor in scaling up to the long-term sustainability of self-directed community development activities, and thus to the projects eventual exit strategy. Members of district parliaments, who will draft laws relating to village empowerment and autonomy, and will have oversight of village budgets (see section 2.2.3), will be key actors in this process, as will the project staff who train and assist them.

District-level line agency staff, including engineers, provided all technical services and supervised all projects under KDP 1, and engineers had final approval of all infrastructure projects. This arrangement was a serious barrier to the development of villagers capacity to design and manage their own projects. Under KDP 2, to enable village empowerment to take hold, line agency staff acted as consultants to the project but had no authority over project choices. They oversaw the work of the kecamatan facilitators, assisted with especially difficult proposal designs, and supervised construction, in close coordination with local government. They also presented district-wide development plans to the inter-village forums. In addition, some line agency staff promoted KDP to villagers on their own initiative, particularly in schools and health clinics. Under KDP 3, villages and line agencies will engage in joint planning for specialized services (health, education, irrigation, etc.), which will be crucial to the institutionalization and long-term sustainability of community-based development after the project has ended. Civil society organizations have supported the project in two important ways. NGOs with experience in community-based development helped to draft and revise the operational manuals, particularly the sections having to do with facilitating participation and cooperation. Twenty-eight NGOs based in the provinces also served as independent project monitors. Universities assisted with facilitator training; they provided classrooms for the initial 18-day facilitator training courses, as well as experts in such areas as social psychology, conflict mediation, engineering, accounting, legal issues, and (in one region, at the request of the regional project manager), gender issues. Journalists acted as independent monitors for KDP. The project contracted with 31 journalists belonging to the Association of Independent Journalists (AIJ) to write stories on any aspect of the project they chose. Some newspapers also assign reporters to cover the project, and are compensated for the time their reporters spend covering project issues. Journalists attend national training workshops each year to exchange ideas and experiences. At the most recent meeting, project managers asked them be more pro-active in discovering and reporting on cases of corruption. The involvement of journalists in the monitoring process has enormous symbolic as well as practical significance, since AIJ had been illegal under Suharto, and journalists had been killed for writing about corruption during his regime. The inclusion of AIJ in the project was, in fact, the Banks only conditionality for the project loan. Private sector actors played a small but central role in scaling up, by linking villagers to services, supplies (cement, steel, fuel, etc.), and commercial outlets for their products. The KDP design allows for villagers to hire contractors and outside experts when needed for difficult infrastructure projects, which has enabled them to develop skills in managing competitive bidding and procurementboth essential for sustainable self-directed development. For villagers engaged in economic activities, linkages with traders and agents has made it possible for them to sell their products in larger markets, and thereby generate the income needed for their businesses to continue to develop. Other private sectors included training and engineering companies hired by the project. The Government of Indonesia. The Government provided an institutional home for the project during a very difficult time in the country. The project was originally lodged with the national planning agency, BAPPENAS, which provided a strong central management unit staffed with people experienced in VIP. Due to changes in the roles of these agencies, KDP was later moved to the Ministry of Home Affairs, Community Development Agency, which formed a central management secretariat to provide operational and policy guidance to the project All three core agencies (BAPPENAS, Ministry of Home Affairs, and Ministry of Finance) introduced and implemented new, more efficient financial management procedures to ensure smooth implementation of the project. From the outset, the Government also formed an inter-ministerial coordination committee that included the ministries of Home Affairs, Finance, Public Works, Education, Health, and Agriculture. Its strong support of the projects innovative approach to community development enabled KDP (1 and 2) to rapidly scale up without undue difficulties. Further, the Government is now supporting the projects conceptual scale-up to focus on governance and legal advocacy for villagers under KDP 3. More specifically: The Ministry of Home Affairs and Regional Autonomy, Department of Community Development, the borrowing agency, had primary responsibility for managing the US$300 million program, including the training and supervision of 34,600 consultants and facilitators. Despite four changes in directors and project managers during the six years of the project (KDP 1 and 2), the ministrys performance was rated satisfactory to highly satisfactory.

The Department of Planning was responsible for selecting the poorest kecamatans to participate in each project cycle. Due to its inexperience with____, the department had great difficulties with poverty targeting for the project, which led to criticism that the project did not pay sufficient attention to poverty targeting. The Ministry of Finance was responsible for transferring funds to the villages in accordance with the allocations agreed upon for different components, and carried out its responsibility without significant problems, as confirmed by the annual project audits carried out the government audit agency. Its strict adherence to the budget lines could have been a barrier to the projects ability to meet additional needs identified